Export-Credit Funding Boosts Satellite Market

Export-credit agencies are becoming fixtures in the global satellite market

The French export-credit agency Coface has long provided export financing in support of the French spacecraft manufacturing and launcher industries. But in recent years, the U.S. Export-Import (Ex-Im) Bank has stepped up its game in the satellite telecom market as well.

An independent federal agency, the Ex-Im Bank provides government-backed loans and credit guarantees to help foreign buyers purchase U.S. goods and services. In 2001, it authorized $9.2 billion in financing to support U.S. exports, a figure that quadrupled to nearly $36 billion in 2012.

A decade ago, the handful of spacecraft projects backed with U.S. export financing were limited to sovereign transactions. Before the financial crisis of 2008, the bank supported only about one satellite deal every three or four years.

Since 2009, however, turmoil in the banking industry and fluctuating currency rates prompted satellite operators to favor export-credit institutions over commercial lenders for financing new projects. In response, over the past three years, the Ex-Im Bank has authorized more than $3.5 billion in satellite financing for U.S. manufacturers, including $517 million in the first quarter of fiscal 2013 alone.

“U.S.-manufactured satellites and satellite-related equipment are highly competitive internationally,” says Marcia Wiss, a partner at Washington-based international law firm Hogan Lovells U.S. who advises export-credit agencies. “As more and more U.S. satellite manufacturers turned to the U.S. Ex-Im Bank for financing their exports, the agency decided it was worthwhile to set up a group within the structured finance department with specialized industry knowledge.”

Even established operators not struggling for cash are availing themselves of this now common source of low-cost financing, notably mobile satellite services (MSS) provider Inmarsat of London and Luxembourg-based SES, the world's second-largest fleet operator by revenue.

As satellite operators increasingly seek export financing, however, critics argue that export-credit agencies are distorting the market. MSS providers Globalstar and Iridium are oft-cited examples, as both would have struggled to complete their second-generation constellations without a combined $1.85 billion in financing backed by Coface in 2010 and 2011. While export financing fuels capital investment in manufacturing, opponents say, it could lead to excess capacity in an MSS sector that includes Inmarsat and Abu Dhabi-based fleet operator Thuraya.

In the meantime, increasingly aggressive export financing on both sides of the Atlantic is prompting established and emerging fleet operators alike to pair U.S.-built satellite developments with launches on European Ariane 5 rockets. And Australian start-up operator NewSat just finalized more than $400 million in export-credit financing for its $661 million Jabiru-1 project, one of Australia's first privately owned commercial satellites (see related article, page 48).

Another $116 million has been guaranteed by Coface with help from European launch services consortium Arianespace, which plans to loft Jabiru-1 on an Ariane 5 ECA heavy-lift rocket in 2015.

The Ex-Im Bank says the transaction will directly support 250 aerospace-sector jobs at Lockheed's manufacturing facilities in Sunnyvale, Calif., and Newtown, Pa., and is expected to indirectly support more than 650 jobs among the company's U.S. suppliers.

Wiss says the dramatic increase in U.S. Ex-Im Bank financing for satellites and satellite-related equipment fits nicely with President Barack Obama's mandate in 2010 to double exports from the U.S. to $2 trillion by 2015.

“U.S. Ex-Im Bank's availability of financing, when commercial bank financing is less available at competitive rates, has been attractive to the satellite industry,” she says.